The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Umunhum who wrote (37960)	8/6/2005 9:03:34 AM
From: russwinter	Read Replies (1) of 110194

Japan's government didn't have a huge deficit that required foreign funding > The Japanese have a govt debt of 150% of GDP, almost twice that of the US. You are correct that they don't depend on foreigners, but that's because they basically monetize it. That's has been a big part of the global Bubble. <The US Government would have to start printing like crazy, interest rates would skyrocket and the Dollar would die.> This will be the event to watch for. The overall debt is so big that they can't possibly monetize all of it, that's why I expect credit spreads to blow out. However, the Fed may focus on keeping the Treasury market intact through massive intervention and monetization. That combined with a flight to safety could keep shorter Treasury yields in check at least in the early phases of a credit revulsion. You are correct about the foreigners though, they may end up being the bond and credit vigilantes on this. If they panic, look out, it will be manifested by a Treasury market collapse along side a USD collapse. That prospect might keep the Wizards in check in regards to the printing presses? Unlikely, but we will have to see.

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